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DECREE No. 199/2004/ND-CP OF DECEMBER 3, 2004 PROMULGATING THE REGULATION ON FINANCIAL MANAGEMENT OF STATE COMPANIES AND MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the 2003 Law on State Enterprises;

At the proposal of the Finance Minister,

DECREES:

Article 1.- To promulgate together with this Decree the Regulation on financial management of State companies and management of State capital invested in other enterprises.

Article 2.- This Decree takes implementation effect 15 days after its publication in the Official Gazette.

The previous regulations on financial management and business accounting, applicable to State enterprises (stated in the attached appendix) and other relevant documents, which are contrary to this Decree, are all hereby annulled.

Article 3.- The Finance Minister shall have to guide and inspect the implementation of the Regulation on financial management of State companies and management of State capital invested in other enterprises, issued together with this Decree.

Article 4.- The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies, the presidents of the provincial/municipal People’s Committees; the Management Boards, general directors and directors of State enterprises engaged in business activities shall have to implement this Decree.

On behalf of the Government

Prime Minister
PHAN VAN KHAI

REGULATION ON FINANCIAL MANAGEMENT OF STATE COMPANIES AND MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

(Issued together with the Government’s Decree No. 199/2004/ND-CP of December 3, 2004)

Chapter I

GENERAL PROVISIONS

Article 1.- Subjects and scope of application

The Regulation prescribes the financial management applicable to State companies, including independent State companies, State corporations (including their independent cost-accounting member companies); the management of State capital invested in other enterprises set up and operating under the Enterprise Law, the Law on Foreign Investment in Vietnam and the Law on Cooperatives.

Article 2.- Interpretation of terms

1. “Capital invested by the State in State companies” means the capital allocated directly from the State budget to State companies upon their establishment and in the course of their business operations; the State capital received from other places under decisions of competent bodies; the value of aids, gifts, presents; unclaimed assets, assets redundant upon inventories of State companies, accounted as increase of State capital at State companies; the capital supplemented from after-tax profits; the land use right value and other amounts calculated into the State capital under law provisions.

2. “Assets of State companies” include fixed assets (tangible fixed assets, intangible fixed assets, long-term financial investments, unfinished capital construction expenditures and long-term deposits, collateral securities); circulating assets (money, short-term financial investments, receivables, inventories, other circulating assets and non-business expenditures), which the State companies have the right to possess, use and dispose according to law provisions.

3. “Mobilized capital of State companies” means the capital amounts mobilized by State companies in forms of bond issuance, loan from organizations and individuals within and without the country and other mobilization forms not banned by law.

4. “Preservation of State capital at State companies” means keeping the State capital at State companies from deficit throughout the business course.

5. Boards for management and administration of State companies with Management Boards include the Management Boards, the Directorates (general directors and deputy-general directors or directors and deputy-directors); for State companies without the Management Boards, they are the directorates.

6. “Other enterprises” mean enterprises operating under the Law on Enterprises, the Law on Foreign Investment in Vietnam, the Law on Cooperatives.

7. “State capital invested in other enterprises” means the capital invested in other enterprises by the State or State companies.

8. “Representatives of State companies’ contributed capital at other enterprises” mean persons nominated by owners, Management Boards or directors of State companies without Management Boards as candidates for, or participants in, the Boards for management and administration of other enterprises where exists contributed capital of State companies.

Article 3.- State companies engaged in public-utility activities

1. State companies participating in supply of public-utility products or services on the basis of bidding or goods order placed by the State or plans assigned by the State shall conduct economic accounting of public-utility products or services according to current regulations.

2. For public-utility products or services subject to mode of bidding, the State companies must cover their own expenditures with the value of bidding implementation and bear self-responsibility for the results of these activities.

When providing public-utility products or services on goods orders placed or plan tasks assigned by the State, the State companies shall use the money amounts paid by the State and/or persons benefiting from the public-utility products or services to cover expenses for public-utility activities and ensure the interests for laborers. In cases where the paid amounts are smaller than actual reasonable expenses, the deficits shall be offset by the State budget according to actual quantity or volume and estimated unit prices. The State companies must organize the separate accounting of revenues and expenditures for these products or services. The deficit compensation amounts constitute the revenues of State companies. The State companies’ business results shall be determined on the basis of aggregating the results of public-utility activities and business activities.

Article 4.- State capital invested in other enterprises

State capital invested in other enterprises shall include:

1. Capital in cash, land use right value or land rents, value of other assets of State companies, which is invested in, or contributed to, other companies by such State companies;

2. Capital invested in, or contributed to, other companies from the State budget, and assigned to State companies for management;

3. Value of shares at equitized State companies, including the value of State shares supplied to laborers in the companies for enjoying dividends when the State companies implemented the equitization in the period before July 14, 1998; the value of State capital at State-run one-member limited liability companies, multi-member limited liability companies;

4. Capital borrowed by State companies for investment;

5. Dividends and other divided amounts invested in, or contributed to, other enterprises by the State or State companies for re-investment in these enterprises;

6. Other types of capital as prescribed by law.

Article 5.- Nominating representatives of State capital at other enterprises

1. Organizations being owners, owners’ representatives, State companies (referred collectively to as capital owners’ representatives) shall manage the State capital at other enterprises through the performance of rights and obligations of representatives of capital owners or shareholders or capital contributors and nominate the representative of State capital portions at other enterprises.

2. Where the State or State companies hold little shares at other enterprises, the capital owners’ representatives shall decide not to nominate the representatives of the State capital portions invested in other enterprises. For this case, the capital owners’ representatives must organize the monitoring of the capital amounts already invested and the divided profits from the capital amounts invested in these enterprises and assign persons to exercise the rights of shareholders, capital contributors according to the provisions in the Charters of other enterprises.

Chapter II

REGULATION ON FINANCIAL MANAGEMENT OF STATE COMPANIES

Section 1. MANAGEMENT AND USE OF CAPITAL AT STATE COMPANIES

Article 6.- Charter capital

1. The charter capital of State companies shall be inscribed in their charters. Owners, owners’ representatives (hereinafter referred collectively to as owners’ representatives) shall approve their companies’ initial charter capital, charter capital increases after obtaining the Finance Ministry’s opinions. The Finance Ministry shall guide the methods of determining charter capital of State companies.

a) The owners’ representatives shall have to invest enough charter capital for State companies. For newly established State companies, the owners’ representatives shall have to invest enough charter capital within two years counting from the date of deciding on establishment of such State companies. If the newly established State companies have to carry out the investment and construction, the owners’ representatives must ensure adequate supply of charter capital when the State companies commence their business operations. Past the above time limit, if the owners’ representative fail to invest adequate capital, they must make adjustment by reducing the State companies’ charter capital. In cases where they do not reduce the charter capital or must not reduce the charter capital as the charter capital has been already equal to the legal capital, they, depending on the practical situation, must reorganize the State companies in form of merger, consolidation, ownership transformation or change of production and/or business lines;

b) For State companies established before July 1, 2004, which are eligible for being retained as State companies, have the State capital amounts at the time this Decree takes implementation effect lower than the charter capital, the owners’ representatives shall have to adequately supplement capital for the State companies before December 31, 2005. After the prescribed deadline, if the owners’ representatives do not adequately supplement the capital, the case shall be handled as provided for at Point a above;

c) For State companies engaged in production and/or business lines which the law requires legal capital for, the State companies’ charter capital must not be lower than the legal capital.

2. In the business course, the owners’ representatives have the right to decide on the increase or reduction of the State companies’ charter capital.

The owners’ representatives can withdraw capital invested in State companies only when the State companies are reorganized or the State companies’ charter capital is adjusted with reduction. The capital withdrawal shall be effected only if it still ensures the State companies’ capability to pay their payable debts.

The Finance Ministry shall guide the order and procedures for increasing or reducing the charter capital of State companies.

3. For State companies designed, established with investment and business-registered, for realization of major, regular and stable objective of supplying public-utility products or services under orders placed, or plans assigned, by the State, or opened to bidding, they shall be added with adequate capital by the owners’ representatives for performance of the public-utility product or service volumes.

Article 7.- Assignment of State capital for investment in State companies

1. Competent State bodies shall assign State capital for investment in newly established State companies.

2. The capital assignment must be completed within 60 days as from the date the State companies are granted the business registration certificates. For State companies which must carry out investment and construction, the capital assignment shall be carried out within 60 days as from the date the State companies commence their business operation.

3. The capital-assigning parties are prescribed as follows:

a) The Finance Ministry, for State companies established under the Prime Minister’s decisions;

b) The branch-managing ministries, for State companies established under decisions of ministries, branches;

c) The People’s Committees of the provinces or centrally run cities (hereinafter called the provincial-level People’s Committees for short), for State companies established under decisions of the provincial-level People’s Committees.

4. The capital-receiving parties are prescribed as follows:

a) The Management Board chairmen, for State companies with Management Boards;

b) Directors, for State companies without Management Boards.

5. For State companies, which have been established before this Decree takes implementation effect and have been assigned capital, the capital assignment shall not be reorganized. For State companies merged with other enterprises and State corporations accepting more members, the capital assignment and reception shall not be reorganized but the State capital at the State companies shall be adjusted to correspond to the capital amounts of these enterprises in the financial statements of the State companies and State corporations.

Article 8.- The State companies’ rights and obligations in the use of capital and funds they have managed

1. The State companies are entitled to take initiative in using the State-assigned capital amounts, other capital sorts and funds they have managed for their business activities. The State companies are answerable to owners’ representatives for the capital preservation and development, capital use efficiency; ensure the interests of persons related to the State companies such as creditors, customers, laborers under the concluded contracts.

2. Where State companies use the funds under their management at variance with the prescribed fund-using purposes, they must ensure adequate sources to meet the spending demands of such funds once the use demands arise. The use of capital and/or funds for construction investment must comply with law provisions on investment and construction management.

3. For State companies designed to regularly and stably supply public-utility products or services on the orders placed, or plans assigned, by the State, capital and resources must be concentrated for the production of such public-utility products or the provision of such public-utility services. When necessary, the owners’ representatives may transfer capital among State companies designed to regularly and stably supply public-utility products or services on the orders placed, or plans assigned, by the State in form of inscribing capital increase or reduction. In cases where capital is transferred to companies of other ministries, branches or localities; where capital is transferred from ministries, central branches to localities or vice versa, the owners’ representatives shall bargain and decide after obtaining the Finance Ministry’s opinion. The above-stated capital transfer must ensure not to affect the supply of public-utility products or services by the State companies having their capital transferred.

4. Where State companies are assigned special tasks by the State, capital and other resources must be concentrated for the fulfillment of such tasks.

Article 9.- Capital mobilization

The capital mobilization shall comply with the provisions of Clause 1, Article 17 of the State Enterprise Law. The competence to approve capital-borrowing contracts shall be effected as follows:

1. The Management Boards shall decide on capital-borrowing contracts with value larger than the charter capital of the State companies. Where the Management Boards assign the general directors, directors to decide on capital-borrowing contracts with value larger than the charter capital, the specific assignments must be inscribed in the charters of the State companies;

2. The representatives of owners of State companies without Management Boards shall decide on capital-borrowing contracts with value larger than the charter capital;

3. Other capital-borrowing contracts with value being equal to or lower than the charter capital shall be decided by the general directors (or directors) of State companies.

Article 10.- Management of payable debts

For payable debts, the State companies have the responsibility:

1. To open books for monitoring all payable debts, including payable interests;

2. To pay the payable debts strictly according to the committed schedules. To regularly consider, assess and analyze the debt-repaying capabilities of State companies, early detecting difficulties in debt repayment in order to find out timely remedies so as not to let overdue debts arise;

3. For debts to be paid in foreign currency(ies), the State companies must fully account the arising exchange rate differences of the payable debt balance into business expenses in the period in order to create sources for debt repayment. In cases where the accounting of exchange rate differences into business expenses makes the companies suffer from losses, the exchange rate differences can be partly distributed to the following year so that the companies shall not suffer from losses, but the level of accounting into business expenses in the year must be at least equal to the exchange rate difference of the foreign currency amounts to be paid in that year.

Article 11.- Preservation of State capital at State companies

The State companies have the responsibility to preserve the State capital at the companies through the following measures:

1. Strictly complying with the regimes of managing the use of capital, assets, distribution of profits, other financial management regimes and the accounting regimes according to the State’s regulations;

2. Buying property insurance as provided for by law;

3. Handling in time the damaged property value according to the provisions of Article 20 of this Regulation, irrecoverable debts according to the provisions of Article 18 of this Regulation and making deductions for setting up the following risk reserves:

a) Stock price decrease reserve;

b) Bad receivables reserve;

c) Long-term investment price decrease reserve;

d) Job-loss, severance allowance reserve.

4. Other measures for preserving the State capital at State companies according to law provisions.

5. The Finance Ministry shall guide the deduction for setting up and the use of these reserves and the methods of determining the extent of preservation of State capital at State companies.

Article 12.- Investment of capital outside State companies

1. The State companies are entitled to use the capital and assets under their respective management for investment outside the companies. The land-related investment outside the State companies must comply with the provisions of land legislation.

The investment outside State companies must comply with law provisions and ensure the principles of efficiency, capital preservation and development, income increase and not affecting the operational objectives of the State companies.

2. Forms of investment outside State companies:

a) Investment in the establishment of State-run one-member limited liability companies;

b) Capital contribution for establishment of joint-stock companies, limited liability companies, partnerships, joint-venture companies, associated companies; capital contribution to business cooperation contracts without forming new legal persons;

c) Purchase of shares of, or contribution of capital to, joint-stock companies, limited liability companies, joint-venture companies, partnerships;

d) Buyout of another company;

e) Purchase of bonds, debentures to enjoy interests;

f) Other investment forms prescribed by law.

3. Competence to decide on projects for investment outside State companies:

a) For the establishment of State-run one-member limited liability companies, the capital contribution for establishment of State-run multi-member limited liability companies or State-run joint-stock companies:

- If such one-member or multi-member limited liability companies, joint-stock companies operate in the domains, branches or geographical areas where the establishment of new State companies is permitted, the Management Boards (for companies with Management Boards) shall decide or assign the general directors to decide, the directors of companies (for companies without Management Boards) to decide on projects according to the levels prescribed at Point c of this Clause; if the projects are beyond such levels, they must be submitted to the owners’ representatives for decision.

- If such State-run one-member or multi-member limited liability companies or joint-stock companies operate in domains, branches or geographical areas other than those where the establishment of new State companies is allowed, the persons deciding on the establishment of State companies shall be the persons who decide on approving the capital contribution schemes for establishment of such enterprises. If State corporations’ member enterprises are capital-contributing organizations, the capital contribution schemes shall be approved by the Management Boards of the State corporations.

b) For capital contribution to establish Vietnam-based joint-venture companies with foreign investment capital, investment or capital contribution for investment in the establishment of foreign-based companies, purchase of companies of other economic sectors, the persons deciding on the establishment of the State companies shall approve the schemes.

c) Other investment projects:

Representatives of owners of State companies shall decide on projects for investment outside the companies with value larger than 50% of the total asset value on the companies’ financial statements publicized in the latest quarter or with smaller percentages inscribed in the companies’ charters, for companies with Management Boards; with value larger than 30% of the total asset value on the companies’ financial statements publicized in the latest quarter or smaller percentages inscribed in the companies’ charters, for companies without Management Boards.

The Management Boards, the directors of companies without Management Boards shall decide on projects for investment outside the companies with value lower than the levels decided by representatives of State companies’ owners.

d) For companies designed to regularly and stably produce major public-utility products or provide public-utility services, the investment outside the companies must be submitted to the owners’ representatives for decision.

4. The State companies must not make investments in, or contribute capital to, other enterprises whose managers, executives or principal owners are spouses, parents, children or siblings of members of the Management Boards, the Control Boards, the Directorates or chief accountants of such companies.

Section 2. MANAGEMENT AND USE OF ASSETS AT STATE COMPANIES

Article 13.- Fixed assets- investment in fixed assets

1. Fixed assets of companies include tangible assets and intangible assets. The Finance Ministry shall prescribe criteria for determination of fixed assets.

2. The competence to decide on investment, construction projects shall comply with the following regulations:

a) For companies with Management Boards: The Management Boards shall decide on investment projects with value being smaller than or equal to 50% of the total asset value inscribed in the companies’ financial statements publicized in the latest quarter, but not exceeding the highest level of Group-B projects under law provisions on investment, construction project management. The level of competence decentralization to the Management Boards must be inscribed in the companies’ charters.

The Management Boards shall decide on competence decentralization to general directors or directors of the companies to decide on investment projects falling under the Management Boards’ deciding competence.

Projects with value being larger than the level decentralized to the Management Boards shall be decided by representatives of the companies’ owners or by competent authorities that are submitted with such projects by representatives of the companies’ owners.

b) For companies without Management Boards: The companies’ directors shall decide on investment projects with value being smaller than, or equal to, 30% of the total asset value inscribed in the companies’ financial statements publicized in the latest quarter, but not exceeding the highest level of Group-B projects according to law provisions on investment and construction project management. This decentralized level shall be inscribed in the companies’ charter.

Investment projects with value being higher than the level decided by companies’ directors shall be decided by representatives of the companies’ owners or by competent authorities that are submitted with such projects by representatives of the companies’ owners.

3. The investment order and procedures shall comply with law provisions on investment and construction project management.

4. For State companies designed to regularly and stably supply public-utility products or services, when necessary, the representatives of companies’ owners may transfer the companies’ assets to other State companies, which perform similar tasks, by mode of inscribing capital increase or decrease. In case of transferring assets to State companies of other ministries, branches or other localities, the owners’ representatives shall bargain and decide after obtaining the Finance Ministry’s opinion. The above-said asset transfer must ensure not to affect the supply of public-utility products or services by the State companies having their assets transferred.

Article 14.- Fixed asset amortization

All existing fixed assets of companies must be amortized, including fixed assets no longer in use, awaiting liquidation, excluding fixed assets of the public works, dwelling houses. Fixed assets with their values fully amortized but being still used in production and business activities must not be further amortized.

The Finance Ministry shall prescribe the minimum amortization level for each type of fixed asset. The companies’ general directors or directors shall decide on the specific amortization levels which, however, must not be lower than the levels prescribed by the Finance Ministry.

Article 15.- Asset lease, mortgage, pledge

1. Companies are entitled to lease, mortgage or pledge their assets on the principles of efficiency, preservation and development of capital according to law provisions.

a) The Management Boards or the owners’ representatives (for companies without Management Boards) shall decide on contracts for lease of assets with value larger than the companies’ charter capital. Contracts of lower value shall be decided by general directors or directors of the companies;

b) The competence to decide to mortgage or pledge the State companies’ assets for capital borrowing shall comply with the provisions in Article 9 of this Regulation.

2. For companies invested with assets for performing the task of regular and stable supply of public-utility products or services, the lease, pledge or mortgage of assets in direct service of the public-utility tasks must be consented by the owners’ representatives.

3. The asset lease, mortgage or pledge must strictly comply with the provisions of the Civil Code and other regulations of the State.

Article 16.- Liquidation, sale of fixed assets and long-term investments

1. Companies may take initiative in selling, liquidating, and have the responsibility to sell, liquidate, fixed assets, which have been out of order, technically obsolete, no longer in use or unusable, and/or long-term investments which have been out of demand for continued investment, in order to recover capital.

2. Competence to decide on the liquidation, sale of fixed assets and/or long-term investments:

a) For companies with Management Boards: The Management Boards shall decide on plans for liquidation, sale of long-term investments, fixed assets with their remaining value being smaller than or equal to 50% of the total asset value inscribed in the companies’ financial statements publicized in the latest quarter; the specific levels shall be inscribed in the companies’ charters. The Management Boards may authorize or assign the general directors or directors of the companies to decide on sale of assets falling under the jurisdiction of the Management Boards;

Plans involving value larger than the levels decentralized to the Management Boards shall be decided by representatives of companies’ owners;

b) For companies without Management Boards: The companies’ directors shall decide on plans for liquidation, sale of long-term investments, fixed assets with remaining values being smaller than or equal to 30% of the total asset value inscribed in the companies’ financial statements publicized in the latest quarter. The specific levels shall be inscribed in the companies’ charters;

Plans involving value larger than the levels decentralized to companies’ directors shall be decided by representatives of companies’ owners;

c) For State companies designed to perform the tasks of regular and stable supply of public-utility products or services, the sale of assets in direct service of the public-utility tasks must be consented by owners’ representatives.

3. The asset sale shall be carried out publicly by auctioning organizations or the companies themselves strictly according to the law-prescribed order and procedures for asset auction. In cases where the sold assets’ value is small, the general directors or directors shall decide to opt for the sale by mode of auction or bargain, but the prices thereof must not be lower than the market prices. The specific levels shall be inscribed in the companies’ charters.

Article 17.- Management of inventories

1. Inventories mean goods purchased for sale and still left in stocks, raw materials, materials, instruments and tools in stock or already purchased and transported en route, unfinished products being in the process of manufacture, finished products but not yet warehoused, finished products left in stock, finished products being consigned for sale.

2. Companies shall have the right and responsibility to promptly handle inventories, which are of poor or lost quality, outmoded, technically obsolete, unsaleable, in late circulation for capital recovery. The competence to decide on the handling shall comply with the provisions in Clause 2, Article 16 of this Decree.

3. At the end of the accounting periods, if the inventories’ cost prices inscribed in the accounting books are higher than the recoverable net value, the companies must make deductions for setting up inventory price decrease reserve according to regulations.

Article 18.- Management of receivable debts

Companies’ responsibility to manage receivable debts:

1. To elaborate and promulgate regulations on management of receivable debts, to clearly divide and determine responsibilities of collectives and individuals for monitoring, recovery and settlement of debts;

2. To open books to monitor debts according to each debtor; to regularly classify debts (floating debts, bad debts, irrecoverable debts), to urge debt recovery;

3. Companies are entitled to sell receivable debts according to law provisions, including immature receivable debts, bad receivable debts, irrecoverable debts, in order to recover capital. The debt-selling prices shall be agreed upon by the parties.

4. Bad receivable debts mean debts, which become overdue under the provisions inscribed in contracts or other commitments or which have not yet become mature but the debtors are almost incapable of repaying them. The companies must make deductions for setting up bad receivable debt reserve according to the provisions in Article 11 of this Regulation.

For irrecoverable receivable debts, the companies have the responsibility to handle them. The irrecoverable debt amounts, after subtracting the compensations paid by relevant individuals or collectives, shall be offset by bad receivable debt reserves and financial reserve funds. If still deficit, they shall be accounted into business expenses of the companies.

The irrecoverable debts, after being handled like above, must be monitored on the accounts outside the accounting balance sheets and recovered by the State companies. The recovered amounts shall be accounted into revenues of the State companies.

The Management Boards, the general directors, the directors of companies shall have to promptly handle bad receivable debts, irrecoverable debts. If failing to promptly handle the irrecoverable debts according to the provisions in this Clause, the Management Boards, the general directors or the directors shall be held responsible as for untruthfully reporting on the companies’ financial situation. If the failure in timely handling thereof leads to loss of State capital at the companies, they must bear responsibility before the owners’ representatives therefor.

Article 19.- Inventory of assets

Companies must inventory and determine the quantities of assets (fixed assets and long-term investments, working assets and short-term investments), compare payable debts and receivable debts upon closure of accounting books for making annual financial statements; upon execution of decisions on division, separation, merger, consolidation, ownership transformation; upon occurrence of natural calamities or enemy sabotage; or for any reasons which cause fluctuations in the companies’ assets; or according to the State’s undertaking. For surplus, deficit assets, irrecoverable debts, overdue debts; the causes, liabilities of relevant persons and the prescribed material compensations must be clearly determined.

Article 20.- Handling of property loss

The property loss means the assets, which are found lost, deficit, damaged, qualitatively degenerated or lost, outmoded, technically obsolete, left in stock through regular and irregular inventories. The companies must determine the lost value, the causes thereof, the liabilities therefor and handle them as follows:

1. If it is due to subjective causes, the loss causers must compensate therefor. the Management Boards or the directors (for companies without Management Boards) shall decide on the compensation levels according to law provisions and bear responsibility for their decisions.

2. The insured assets, if being lost, shall be handled according to insurance contracts.

3. The lost property value, after being offset by pecuniary compensations of individuals or collectives, of insurance organizations and still deficit, shall be made up for by the financial reserve funds of the companies. Where the financial reserve funds are not enough for the offset, the deficits shall be accounted into the production and business expenses in the period.

4. In special cases where serious damage caused by natural calamities or force majeure incidents cannot be overcome by the companies themselves, the Management Boards or the directors (for companies without Management Boards) shall elaborate the damage-handling plans for submission to the owners’ representatives and competent finance bodies. After obtaining the opinions of the finance bodies, the owners’ representatives shall decide on the handling of damage according to competence.

5. The companies have the responsibility to promptly handle the property losses; in case of leaving the property losses unhandled, the Management Boards, the general directors or directors of the companies shall be held responsible before the owners’ representatives therefor like the cases of untruthfully reporting on the financial situation of enterprises.

Article 21.- Asset reevaluation

1. Companies shall reevaluate their assets in the following cases:

a) Under decisions of competent State bodies;

b) Upon ownership transformation of companies: equitization, sale of companies, diversification of ownership forms;

c) Using assets for investment outside the companies.

2. The asset reevaluation must strictly comply with the State’s regulations. The positive or negative value differences due to asset reevaluation prescribed in Clause 1 of this Article shall be handled in compliance with the State’s regulations on a case-by-case basis.

Section 3. REVENUE, EXPENDITURE AND BUSINESS RESULTS

Article 22.- Revenue

1. A company’s revenue shall comprise revenue from business activities and other revenues.

2. Revenue from business activities shall include revenue from ordinary business activities and revenue from financial activities:

a) Revenue from ordinary business activities means the entire receivable money amount arising in the period from the sale of commodities, the provisions of services of the company. For companies which supply public-utility products or services, the revenue shall also include the State’s supports for the companies when the companies supply products or services according to State-assigned tasks and earn revenues which cannot over the expenditures;

b) Revenue from financial activities shall include revenues from copyrights, permitting other parties to use the companies’ assets, from loan interests, deposit interests, interests on deferred payment or installment payment on goods sale, the financial leasing interests; difference profits from foreign currency sale, exchange rate difference; difference profits from transfer of capital and divided profits from investment outside the companies (including after-tax profits after making deductions for various funds of the State-run one-member limited liability companies; the after-tax profits divided according to State capital and the after-tax profits deducted for establishment of development investment funds of independent cost-accounting member companies).

3. Other revenues include proceeds from liquidation and sale of fixed assets, collected insurance indemnities, payable debts with unidentified creditors and being inscribed as revenue increases, fines collected from customers for contractual breaches, and other collections.

4. For enterprises engaged in particular business activities such as banking, insurance, the determination of their revenues shall comply with the law provisions governing these business domains.

5. The Finance Ministry shall prescribe conditions and time for revenue determination.

Article 23.- Expenses for business activities

Expenses for business activities of companies mean the arising spending amounts related to production and business activities in the fiscal year, including:

1. Production and business expenses:

a) Expense for raw materials, materials, fuels, power, semi-finished products and services purchased from the outside (calculating according to the actual consumption levels and the actual cost prices), expense for distribution of labor instruments, tools, expense for repair of fixed assets, pre-deducted expense, expense for overhaul of fixed assets.

b) Expense for fixed asset amortization calculated according to the provisions in Article 14 of this Regulation.

c) Expense for salary, wage, expense of salary nature, to be paid to laborers and decided by Management Boards or directors (for companies without Management Boards) under the guidance of the Ministry of Labor, War Invalids and Social Affairs.

d) Social insurance funding, trade union funding, medical insurance premiums, which must be paid for laborers by the companies according to regulations.

e) Expense for transactions, brokerage, guest reception, marketing, trade promotion, advertisement, meetings, accounted according to actually arising expense.

f) Other pecuniary expenses include:

+ Natural resource tax, land tax, license tax;

+ Land rent;

+ Severance or job-loss allowances to laborers;

+ Training to raise managerial capabilities, professional skills of laborers;

+ Expense for healthcare work; expense for scientific research, technological renewal research;

+ Innovation rewards, increased labor productivity rewards, supplies and expense saving rewards. The reward levels shall be decided by general directors, directors of companies, based on the efficiency brought about by the above things but must not be higher than the expense savings brought about by such things within one year;

+ Expense for female laborers;

+ Expense for environmental protection;

+ Expense for mid-shift meals for laborers;

+ Expenses for activities of the Party and mass organizations in the companies ( expenses outside the funding of the Party and mass organizations to be spent from the prescribed sources);

+ Other pecuniary expenses;

g) The actually lost property value, the irrecoverable debts shall be handled according to the provisions in Clause 4, Article 18 and Clause 3, Article 20 of this Regulation.

h) The values of inventory price decrease reserve, bad receivable debt reserve, severance and job-loss allowance reserve, deductions for setting up of funds under the provisions in Clause 3, Article 11 of this Regulation, the exchange rate difference according to foreign-currency long-term debt balance, pre-deducted expense for product warranty, reserves prescribed by law for enterprises engaged in particular activities.

i) Financial activity expenses, including expenses related to investment outside the companies, payable interests on mobilized capital, exchange rate difference upon payment, commercial discount expense, asset-leasing expense, long-term investment price decrease reserve.

2. Other expenses, including:

a) Expense for fixed asset sale, liquidation, including the remaining values of fixed assets upon their liquidation, sale;

b) Expense for recovery of debts already deleted from the accounting books;

c) Expense for fine collection;

d) Payment of fines for contractual breaches;

e) Other expenses.

3. The following amounts covered by other sources or not related to production and business activities shall not be accounted into production and business expenses:

a) Expense for procurement, construction, installation of tangible or intangible fixed assets;

b) Loan interest expenses accounted into investment and construction expenditures, exchange rate differences of construction investments arising before the time of putting the works to use;

c) Other expenses not related to business activities of the companies; expenses without valid vouchers;

d) Fines for law violations committed not by the companies but by individuals.

Article 24.- Expense management

Companies must strictly manage all expenses in order to reduce expenditures and production costs with a view to increasing profits by the following managerial measures:

1. Elaborating, promulgating, and organizing the implementation of, technical-economic norms suitable to technical-economic characteristics, business lines, managerial and organizational forms, equipment level of the companies. The norms must be disseminated to implementers, publicized to laborers in the companies for application, inspection and supervision. In case of failure to achieve the norms, thus raising the costs, the causes thereof and the responsibilities therefor must be clearly analyzed for handling according to law provisions. If it is due to subjective causes, the compensations therefor must be made. The competence to decide on compensation levels shall comply with the provisions in Clause 1, Article 20 of this Regulation.

2. For companies doing business in monopolistic fields, annually they must report to the owners’ representatives and the finance agencies (the provincial/municipal Finance Services, for local enterprises, and the Finance Ministry, for central enterprises) on the situation of production and business expenses. The reports must analyze and compare the implementation with the norms of fixed asset amortization expenses, labor and wage expenses, raw material, material and fuel expense, enterprise management expense including expenses for advertisement, marketing, transaction, guest reception, other expenses, clearly determining the causes, responsibilities of collectives or individuals for implementation in excess of the norms. The Finance Ministry shall prescribe this reporting regime.

3. To periodically organize the analysis of production expenditures, costs of the companies with a view to detecting shortcomings and weaknesses in management and factors that increase expenditures, costs so as to work out remedial solutions in time.

Article 25.- Production costs, service expenses

1. The total costs of all commodities consumed in the period (or the costs of goods sold) include the prime costs of products, goods consumed in the period (or the costs of goods sold); the company management expenses arising in the period; and goods sale expenses arising in the period.

2. The service expenses spent in the period include the service expense arising in the period, the company management expense arising in the period, goods sale and service expense arising in the period.

3. The Finance Ministry shall stipulate the principles and methods of determining the product and service costs.

Article 26.- Earned profits

1. Profits earned in the year by a company mean the total of profits earned from business activities and profits earned from other activities.

2. The profits from business activities include:

a) The difference between the goods sale and service provision turnover and the total cost of consumed products and goods or service expenses in the period;

b) The difference between the turnover from financial activities and the expense for financial activities arising in the period.

3. Profits from other activities mean the difference between the revenue from other activities and the expense for other activities arising in the period.

Section 4. PROFIT DISTRIBUTION

Article 27.- Profit distribution

1. The companies’ earned profits, after being subtracted for offsetting the previous year’s losses according to the provisions of the Enterprise Income Tax Law and paying the enterprise income tax, shall be distributed as follows:

a) Dividing interests to associated capital-contributing members according to contracts (if any);

b) Offsetting losses of the previous years, which are no longer valid for deduction from pre-tax profits;

c) Deducting 10% for the financial reserve fund; when the fund’s credit balance is equal to 25% of the charter capital, no more deduction is required;

d) Making deductions for setting up special funds from after-tax profits according to percentages prescribed by the State for particular companies, which are required by law to make deductions;

e) The amount left after the deductions prescribed at Points a, b, c and d of this Clause are made shall be distributed according to the ratio between the State capital at the companies and the capital mobilized by the companies themselves in the year on annual average.

The capital mobilized by the companies themselves means the money amounts mobilized by the companies through issuance of bonds, notes, loans from organizations and/or individuals within and without the country on the basis that the companies take self-responsibility for repayment of both principals and interests to lenders as committed, except for loans guaranteed by the Government, the Finance Ministry and loans provided with interest rate supports.

2. The profits divided according to the State investment capital shall be used for reinvestment in supplementing the State capital at State companies. In cases where it is not necessary to supplement the State capital at the State companies, the owners’ representatives shall decide to transfer them to the concentrated funds for investment in other companies. The Prime Minister shall decide on the establishment of such funds.

3. Profits divided according to self-mobilized capital shall be distributed as follows:

a) Deducting at least 30% for the development investment funds of the companies;

b) Deducting 5% at most for setting up reward funds for the company management and administration boards. The annual deduction level shall not exceed VND 500 million (for companies with Management Boards), VND 200 million (for companies without Management Boards), provided that the ratio of pre-tax earned profits to the State capital at the companies must be equal to or larger than the plan profit ratio;

c) The remaining profits shall be distributed into the reward and welfare funds of the companies. The level of deduction for each fund shall be decided by the Management Boards or the directors of companies without Management Boards after consulting with the Executive Committees of the companies’ trade unions.

4. The owners’ representatives shall decide on the specific deduction percentages for development investment funds and reward funds for the company management and administration boards at the proposals of the Management Boards (for companies with Management Boards) or the directors (for companies without Management Boards).

5. State companies operating in monopolistic fields are entitled to make the maximum deduction of three months’ paid salaries for the two reward and welfare funds. The profits left after the deductions for reward and welfare funds are made shall be supplemented to the development investment funds of the companies.

6. For newly invested and set up companies, in two consecutive years after earning profits, if the profits are distributed as mentioned above but the two reward and welfare funds fail to reach two months’ actual salaries, the companies are entitled to reduce the deductions for development investment funds in order to ensure two months’ full salaries for these two funds. The maximum reduction level is equal to the total deduction for development investment fund in the period of profit distribution of that year.

7. For State companies designed to ensure regular and stable supply of public-utility products or services under orders placed, or plans assigned, by the State, if the above-prescribed profit distribution fails to ensure adequate deductions for the reward and welfare funds at the level of two months’ salaries, the profit distribution shall be effected as follows:

a) In case of little profits, the companies are entitled to reduce the deductions for development investment funds, reduce the profits divided according to the State capital in order to ensure two months’ full salaries for the two funds. If all the above reductions are made but the deductions remain not enough for two months’ salaries for the two funds, the State shall provide supports to make up for the deficits.

b) In case of no profits, the State shall provide adequate supports being equal to two months’ salaries for establishment of the two funds.

Article 28.- Purposes of using various funds

1. The financial reserve fund shall be used:

a) To make up for property loss or damage, unrecoverable debts arising in the business process;

b) To make up for the companies’ losses under decisions of the Management Boards or owners’ representatives.

2. The development investment fund shall be used to supplement the companies’ charter capital.

3. The reward fund shall be used:

a) To make year-end or periodical rewards on the basis of labor productivity and work achievement of each official and employee in the State companies;

b) To make extraordinary rewards to individuals, collectives in the State companies;

c) To reward individuals and units outside the State companies for their great contributions to business activities and managerial work of the companies.

The levels of rewards prescribed at Points a, b and c of this Clause shall be decided by general directors or directors. Particularly for the rewards mentioned at Point a, the opinions of the companies’ trade unions are required before decisions are made.

4. The welfare fund shall be used:

a) For investment in construction or repair of public-utility works of the companies;

b) For expenditures on public-utility activities of collectives of workers and employees in the companies, on social welfare;

c) For partial contribution of capital for investment in the construction of common public-utility works within the branch or with other units under contracts;

d) For partial unexpected difficulty supports for laborers including pensioners, persons having retired due to their poor health, difficult plights, without anyone to rely on, or for social charity work.

The use of welfare funds shall be decided by the Management Boards or directors (for companies without Management Boards) after consulting with the trade unions of the companies.

5. The reward funds for the company-management and administration boards shall be used to reward the Management Boards, the directorates of companies. The reward levels shall be decided by the owners’ representatives, based on the efficiency of the companies’ business activities, at the proposals of the Management Board chairmen or directors of the companies, for companies without Management Boards.

6. The use of the above-mentioned funds must be publicized according to regulations on financial publicity, regulations on grassroots democracy and the State’s regulations.

7. The companies can make spending from the reward, welfare, company management and administration board-rewarding funds only after fully repaying due debts and fulfilling other property obligations.

Section 5. FINANCIAL PLANS, ACCOUNTING, STATISTICAL AND AUDITING REGIMES

Article 29.- Financial plans

Basing themselves on the criteria of profit ratios to the State’s investment capital assigned by owners’ representatives, the companies shall work out long-term and annual financial plans compatible with their business plans.

The Management Boards or directors (for companies without Management Boards) shall decide on the financial plans of the companies and report them to the owners’ representatives for use as bases for supervising and evaluating the results of management and administration of business activities by the Management Boards and the directors of the companies.

The Finance Ministry shall specify norms of the financial plans of State companies.

Article 30.- Financial statements

1. At the end of the accounting periods (quarter, year), the companies must elaborate, present and submit financial statements and statistical reports according to law provisions. The Management Boards or directors of the companies (for companies without Management Boards) shall bear responsibility for the accuracy and truthfulness of these reports.

State companies must have their annual financial statements audited according to law provisions.

2. State companies shall publicize their financial situation according to the State’s regulations. The Finance Ministry shall have to guide, inspect and supervise the publicity of data and financial statements of the State companies.

3. State companies must organize the accounting and statistical works according to law provisions.

4. The companies submit to the inspection, examination and supervision of their financial works by competent finance bodies according to law provisions.

Section 6. POWERS, OBLIGATIONS AND RESPONSIBILITIES OF MANAGEMENT BOARDS, GENERAL DIRECTORS, DIRECTORS IN THE FINANCIAL MANAGEMENT OF THE COMPANIES

Article 31.- Powers of the Management Boards of State companies

1. The Management Boards shall perform the function of managing the companies and, within the scope of their competence, have to carry out, examine and supervise the financial activities of the companies.

2. To receive and preserve as well as develop the State-assigned capital. To be answerable to owners’ representatives for the results of the companies’ business activities, ensure the achievement of targets assigned by the State to the companies. To propose the owners’ representatives to increase or reduce the charter capital of the companies.

3. To submit to the owners’ representatives for approval the plans on investment and construction, on investment outside the companies, the contracts on assignment and sale of assets beyond the levels decentralized to the Management Boards; to decide on percentages of deductions for development investment funds, the company management and administration board-rewarding funds; to decide on plans for capital mobilization leading to change of companies’ ownership.

4. To decide according to competence on the following issues:

Apart from the competence prescribed in Clause 1 of Article 9, Clause 3 of Article 12, Clause 2 of Article 13, Clause 1 of Article 15, Clause 2 of Article 16 and other articles of this Regulation, the Management Boards shall decide on the following issues:

a) The deduction percentages for reward and welfare funds of the companies; the deduction percentages for various funds as prescribed for State-run one-member limited liability companies with the Management Boards being the owners.

b) The promulgation of internal regulations on financial management of the companies, technical-economic norms, labor norms, labor productivity, financial expense norms and other norms;

c) Long-term and annual financial plan targets of the companies;

d) The appointment of representatives of the capital portions invested in other enterprises.

5. To adopt the annual financial statements of the companies, the plans on use of after-tax profits, handling of losses; to announce, publicize the annual financial statements according to regulations; to adopt the annual financial statements of the independent cost-accounting member companies of corporations.

6. To check and supervise the general directors, directors and member units in the use, preservation and development of capital, the performance of obligations towards the State, the achievement of targets assigned by the State to the companies according to law provisions.

7. To implement the regulation on supervision and assessment of efficiency of operations of member companies according to the State’s regulations.

8. To decide on other issues as prescribed by law.

Article 32.- Obligations and responsibilities of the Management Boards, the chairmen of the Management Boards

1. Obligations of the chairmen and members of the Management Boards:

a) To honestly and responsibly exercise the delegated powers and perform the assigned obligations for the interests of the State and the companies;

b) Not to abuse their positions and powers to use capital, assets of the companies for the benefits of their own, their families or other persons. Not to donate, present the companies’ assets to any subject;

c) To annually report on results of management and supervision of activities of the companies to the owners’ representatives, on the results of ranking of member companies and the State companies;

d) Other obligations as prescribed by law.

2. The Management Board chairmen and/or members, who violate their companies’ charters, make decisions beyond their competence or ultra vires, who abuse their positions and powers, thus causing damage to their companies and the State, shall have to compensate therefor according to law provisions and the companies’ charters. The owners’ representatives shall decide on the compensation levels.

3. The Management Board chairmen and/or members shall be dismissed in the following cases:

a) Reporting untruthfully on the financial situation of their companies twice or more or once but with serious distortion of the financial situation of their companies;

b) Letting their companies suffer from losses for two years in a row or fail to achieve the profit-State investment capital ratios for two consecutive years or fall into the state that there appears a profitable or break-even year in between two years of losses, except for the cases where the losses or the profit-State investment capital ratio decrease are approved by competent authorities; where losses or profit-State investment capital ratio decrease are attributed to objective reasons already explained and accepted by competent bodies; where in the first years of operation after new investment or production expansion investment, technological renewal, the losses are already determined in the feasibility study reports;

c) Failing to promulgate technical-economic norms, labor norms, labor productivity norms, norms of financial expense and other expenses; failing to urge the general directors, directors of their companies to disseminate and organize the implementation of promulgated norms; failing to organize the assessment, adjustment of norms to suit the reality and management requirement.

4. In cases where they let their companies suffer from losses or lower profit-State capital ratios year after year or fail to achieve the plan profit targets assigned by the owners’ representatives, fail to ensure the minimum salary for the laborers, they shall be degraded in salary and not entitled to rewards.

5. They shall be administratively handled or disciplined for committing the following acts, depending on the seriousness of their violations:

a) Violating the financial management, accounting, auditing regimes and other regimes but not seriously enough for penal liability examination;

b) Deciding on inefficient investment projects, failing to recover capital, failing to repay debts.

6. Where the companies fall into the state of bankruptcy but the Management Boards do not request the general directors or directors to file written requests for bankruptcy, where the companies are reorganized, ownership-transformed but the Management Boards do not request the general directors or directors to carry out procedures for their reorganization, dissolution or ownership transformation, the Management Board chairmen and members shall be relieved from their duties.

7. To perform other responsibilities as prescribed by law.

Article 33.- Powers of general directors, directors of State companies

1. To be legal-person representatives of the companies, to have supreme executive powers in implementation of investment projects, business activities in order to attain the business plan targets prescribed by the Management Boards. To propose the Management Boards to submit to the owners’ representatives or to personally submit to the owners’ representatives (for companies without Management Boards) the increase- or decrease-adjustment of the charter capital of the companies.

2. To receive the State-assigned capital, for companies without Management Boards; to take responsibility before the Management Boards or the owners’ representatives (for companies without Management Boards) for the preservation and development of the State capital at the companies.

3. To decide on investment projects, projects for investment outside the companies, plans on capital borrowing, plans on asset liquidation and sale according to the decentralization by the Management Boards or owners’ representatives (for companies without Management Boards). To submit to the Management Boards or the owners’ representatives (for companies without Management Boards) for approval, projects and/or plans falling beyond their competence.

4. To work out and submit to the Management Boards for decision or decide by themselves (for companies without Management Boards) long-term and annual financial plans suitable to the business plans; technical-economic norms, labor norms, financial expense norms and other expenses suitable to the business conditions of the companies, which shall serve as bases for administering business activities of the companies.

5. To determine the deduction percentages for the development investment funds, the company management and administration board-rewarding funds and report them to the Management Boards for submission to the owners’ representatives or personally submit them to the owners’ representatives (for companies without Management Boards) for decision. To decide on deduction percentages for reward and welfare funds of the companies (for companies without Management Boards) and take responsibility before the owners’ representatives for their own decisions.

Article 34.- Obligations and responsibilities of general directors, directors

1. To honestly and responsibly exercise the delegated powers and perform the assigned obligations for the interests of the State and the companies.

2. Not to abuse their positions and powers to use capital, assets of the companies for the benefits of their own, their families and/or other persons. Not to donate or present assets of the companies to any subject.

3. When the companies are incapable of repaying their payable debts, property obligations, to report such to the Management Boards and concurrently notify the creditors thereof and to find measures to overcome the financial difficulties of the companies; not to raise salary, to pay rewards to laborers and managerial officials of the companies. If their failure to apply these measures causes damage to creditors, they must bear personal liability for such damage.

4. In case of violating the companies’ charter, making decisions beyond competence or ultra vires, abusing positions and powers, thus causing damage to the companies and the State, to pay compensations therefor according to law provisions and the companies’ charters. The Management Boards or owners’ representatives (for companies without Management Boards) shall decide on the compensation levels.

5. To bear responsibility before the owners’ representatives, the Management Boards and before law for administering activities of the companies.

6. To bear responsibility for, and fulfill the obligations towards, the mobilized capital and other capital sources of the companies; to take material liability for damage caused to the companies by their faults.

7. To make and submit to the Management Boards or the owners’ representatives (for companies without Management Boards) for adoption the financial statements of the State companies. To bear responsibility for the accuracy and truthfulness of data in the financial statements and other financial information.

8. The general directors (or directors) shall be relieved from duty or have their contracts terminated ahead of time in the following cases:

a) Reporting untruthfully on the financial situation of the companies twice or more or once but with serious distortion of the financial situation of the companies;

b) Letting their companies suffer from losses for two years in a row or fail to achieve the profit-State investment capital ratios for two consecutive years or fall into the state that there appears a profitable or break-even year in between two years of losses; except for cases where such losses or profit-State investment capital ratio decrease are approved by competent authorities; where the losses or the profit-State investment capital ratio decrease are attributed to objective reasons already explained and accepted by competent State bodies; where in the initial years of operation after new investment or production expansion investment, technological renewal, the losses have been determined in the feasibility study reports;

c) Failing to file written requests for bankruptcy when the companies have fallen into the state of bankruptcy; failing to carry out the procedures for reorganization, dissolution or ownership transformation when the companies are subject to reorganization, dissolution or ownership transformation;

d) Failing to fulfill the tasks or targets assigned by the persons who have appointed or recruited them or failing to fulfill their contractual obligations;

e) Failing to organize the determination of technical-economic norms, labor norms, labor productivity, financial expense and other expense norms for submission to the Management Boards for promulgation or for self-promulgation (for companies without Management Boards); failing to disseminate them to the subjects implementing the norms, failing to organize the implementation of norms; failing to organize the analysis and assessment of amendment, supplementation of norms to suit the reality and management requirements.

9. In case of letting the companies suffer from losses or profit-State investment capital ratio decrease year after year or failing to achieve the plan profit targets according to contractual terms or targets assigned by the persons who have appointed them, failing to ensure the minimum salary for laborers, they shall be degraded in salary and not entitled to rewards.

10. To be administratively handled or disciplined, depending on the seriousness of their violations, for the following acts:

a) Violating the financial management, accounting, auditing regimes and other regimes but not seriously enough for penal liability examination;

b) Deciding on inefficient investment projects, organizing the implementation of investment projects not according to plans, prolonging it thus leading to late recovery of capital or failure to recover capital, failure to repay debts.

11. Annually, the general directors (or directors) of the companies must report on the results of administering activities of the companies to the owners’ representatives and the Management Boards, for companies with Management Boards.

12. To fulfill other responsibilities as prescribed by law.

Chapter III

STATE CORPORATIONS

Article 35.- State corporations’ capital

1. A corporation’s capital shall include the capital invested in the corporation by the State, capital mobilized by the corporation itself and other capital sources as prescribed by law.

2. The State capital invested in State corporations set up and invested under the State’s decisions means the State capital amounts directly managed by the corporations or invested in their independent cost-accounting member companies by the corporations. The State capital directly managed by corporations includes:

a) The State capital directly managed by the corporations at their head-offices, their dependent cost-accounting member units; State capital in non-business units under the corporations;

b) The State capital invested by the corporations in State-run one-member limited liability companies with the corporations being the owners;

c) The State capital invested by the corporations in other enterprises.

3. The State capital invested in the corporations set up and invested by companies themselves (hereinafter called the parent companies, the affiliate companies) means the State capital invested in the companies which hold dominant powers over other enterprises (hereinafter called the parent companies), including the State capital directly managed and used by the parent companies for production and/or business activities, the State capital invested by the parent companies in their affiliate companies and other enterprises.

4. The State capital invested in the State Capital Investment and Business Corporation includes the State capital directly managed and used by the Corporation and the State capital invested by the Corporation in limited liability companies, joint-stock companies, partnerships, joint-venture companies and other economic organizations.

5. The charter capital of independent cost-accounting member companies of the corporations set up and invested by the State means the capital amounts invested by the corporations, which are inscribed in the charters of the independent cost-accounting member companies.

6. The charter capital of State-run one-member limited liability companies with their corporations or parent companies being owners means the capital amounts invested by the corporations or parent companies and inscribed in the charters of the State-run one-member limited liability companies.

7. The State shall invest capital only in corporations or parent companies. The investment of capital in independent cost-accounting member companies and/or other enterprises shall be decided by the corporations or parent companies.

Article 36.- Assets of State corporations

1. The assets of corporations invested and set up under the State’s decisions shall be formed from the State capital invested in the corporations, borrowed capital and other lawful capital sources managed and used by the corporations.

The assets of a corporation shall include:

a) Tangible and intangible fixed assets, circulating assets of the corporation’s head-office, independent cost-accounting units, non-business units;

b) Long-term investments including capital invested by the corporation in its independent cost-accounting member companies, State-run one-member limited liability companies with the corporation being owner, other enterprises, long-term bond and note investments and other long-term investments;

c) Short-term investments invested directly by the office or dependent cost-accounting units of the corporation.

The corporations’ assets do not include assets of limited liability companies, independent cost-accounting member companies, joint-stock companies, where the corporations have dominant contributed capital.

2. The assets of self-invested and self-established corporations shall be formed from the State capital invested in the parent companies, borrowed capital and other lawful capital sources directly managed and used by the parent companies. The assets of the corporations are the assets of the parent companies.

3. The assets of the State Capital Investment and Business Corporation shall be formed from the State capital invested in the Corporation, borrowed capital and other lawful capital sources managed and used by the Corporation. The assets of the Corporation include fixed assets, liquid assets, which are directly managed and used by the corporations; the corporation’s long-term investments including capital invested in State-run one-member limited liability companies with the Corporation being owner and capital invested in other enterprises; short-term investments of the Corporation.

4. The assets of independent cost-accounting member companies in the corporations invested and set up under the State’s decisions shall be formed from the capital invested by the corporations in the member companies; borrowed capital and other lawful capital sources managed and used by the member companies.

The assets of independent cost-accounting member companies do not belong to the corporations’ ownership.

5. The assets of State-run one-member limited liability companies with the corporations or the parent companies being owners shall be formed from the capital invested by the corporations or parent companies in the one-member limited liability companies, borrowed capital and other lawful capital sources managed and used by the State-run one-member limited liability companies.

The assets of the State-run one-member limited liability companies do not belong to the ownership of the corporations or parent companies.

Article 37.- Management of capital and assets of corporations invested and set up by the State

1. Corporations invested and set up by the State.

a) The corporations shall invest capital in their independent cost-accounting member companies. The capital amounts assigned by the corporations before this Decree takes effect shall be considered the capital amounts invested by the corporations in the member companies. The corporations shall be responsible for the debts and other property liabilities of the member companies within the capital amounts they have invested in the member companies;

b) For State-run one-member limited liability companies with the corporations being their owners, the corporations shall not conduct the capital assignment and reception but invest capital in those companies;

c) The corporations must not transfer assets of independent cost-accounting member companies, State-run one-member limited liability companies by mode of non-payment;

d) The corporations must not directly withdraw capital already invested in independent cost-accounting member companies, State-run one-member limited liability companies with the corporations being owners’ representatives or other enterprises. The capital withdrawal shall be effected by mode of reselling the invested capital amounts to individuals and/or other legal persons. In case of reorganizing or adjusting the charter capital of independent cost-accounting member companies, State-run one-member limited liability companies, the corporations may directly withdraw capital already invested in these companies but must ensure adequate charter capital and capability to repay payable debts of such companies;

e) The total asset value serving as basis for decentralizing the competence to decide on projects for investment outside the enterprises, sale of fixed assets, long-term investment of State corporations, companies shall be determined according to the provisions of Clause 1, Article 36 above;

f) To exercise the other rights and perform other responsibilities according to law provisions.

2. The independent cost-accounting member companies of corporations shall manage capital and assets according to the provisions of Sections 1 and 2, Chapter II of this Regulation and the following stipulations:

a) The member companies may flexibly use the capital amounts under their respective management, including the capital invested by the corporations, take responsibility before the Management Boards for the profit-capital ratio targets and efficiency of the use, preservation and development of capital invested in the companies by the corporations;

b) The member companies may decide on investment plans according to the levels decentralized by the corporations, which are prescribed in the charters of the member companies.

3. The State-run one member limited liability companies and joint-stock companies where the corporations hold dominant contributed capital shall manage capital and assets according to law provisions applicable to these types of enterprise.

Article 38.- Management of capital and assets of parent companies and affiliate companies

1. The parent companies shall manage capital and assets according to the provisions of Sections 1 and 2, Chapter II of this Regulation.

The parent companies shall exercise the rights and perform the responsibilities of owners over the capital amounts invested in their affiliate companies and other enterprises according to law provisions.

2. The affiliate companies shall manage capital and assets according to law provisions applicable to form of organization and operation of such companies.

Article 39.- Management of capital and assets of the State Capital Investment and Business Corporation

The State Capital Investment and Business Corporation shall manage capital and assets according to the provisions of Sections 1 and 2, Chapter II of this Regulation.

Article 40.- Management of revenues, expenditures and business results of State corporations

1. The corporations invested and set up by the State shall manage their revenues, expenditures and business results according to the provisions of Section 3, Chapter II of this Regulation and the following stipulations:

a) The revenues of a corporation shall include revenue from business activities, revenue from other activities carried out by the corporation’s head-office and dependent cost-accounting units. The revenue contents shall comply with the provisions of Article 22 of this Regulation. The capital invested by the corporation in its independent cost-accounting member companies shall be considered the capital invested outside the corporation; the profits divided according to the capital amounts invested by the corporation in the member companies shall be the revenues from financial activities of the corporation.

The amounts of managerial funding collected by the corporation’s superior from the member companies shall be the revenues of the corporation;

b) A corporation’s expenditures shall include expenses for business activities and expenses for other activities of the head-office and dependent units of the corporation. The expenditure contents shall comply with the provisions of Article 23 of this Regulation;

c) A corporation’s profits shall include the profits from business activities and profits from other activities of the head-office and dependent units of the corporation. The profit contents shall comply with the provisions of Article 26 of this Regulation;

d) The independent cost-accounting member companies shall manage their revenues, expenditures and profits according to the provisions of Section 3, Chapter II of this Regulation. The managerial funding amounts paid for the corporation by its superior shall be accounted into expenses for business activities.

2. The parent companies, the State Capital Investment and Business Corporation shall manage revenues, expenditures and profits according to the provisions of Section 3, Chapter II of this Regulation.

Article 41.- Distribution of profits of State corporations

1. A corporation’s profits shall include the profits from direct business activities at the corporation, including profits divided from other enterprises where the corporation has invested capital. Where the enterprises have already paid the enterprise income tax before division of profits, the corporation shall not have to pay the income tax on the profit amounts divided from these enterprises.

The corporations’ profits left after the payment of enterprise income tax and the subtraction of amounts as capital addition for independent cost-accounting member companies and/or State-run one-member limited liability companies with the corporations being owners, shall be distributed according to the provisions of Article 27 of this Regulation.

2. The profits of independent cost-accounting member companies of the corporations invested and set up by the State, which are left after the payment of enterprise income tax, shall be distributed according to the provisions of Clause 1, Article 27 of this Regulation and the following stipulations:

The profits divided according to the corporations’ capital shall be used for investment to increase the corporations’ capital at the member companies. In cases where the companies have no demands for capital addition or it is unnecessary to add capital to these companies, the corporations shall decide to collect these profits.

3. The profits of the State-run one-member limited liability companies with the corporations being owners shall be distributed according to the provisions of the Financial Regulation applicable to this type of enterprise.

4. The profits of joint-stock companies, multi-member limited liability companies shall be distributed under decisions of shareholders’ general assembly, the Members’ Councils or capital-contributing members.

Article 42.- Purposes of using various funds

The purposes of using assorted funds of corporations, parent companies, independent cost-accounting member companies shall comply with the provisions of Article 28 of this Regulation.

Article 43.- Financial statements of corporations

The corporations invested and set up by the State, the corporations invested and set up by companies, the State Capital Investment and Business Corporation and the independent cost-accounting member companies shall make their financial statements according to the provisions of Article 30 of this Regulation.

Apart from the financial statements on their business activities, the corporations invested and set up by the State, the corporations invested and set up by companies themselves, the State Capital Investment and Business Corporation must also make the consolidated financial statements of the entire corporations according to law provisions.

Chapter IV

MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

Article 44.- Representatives of owners of State capital invested in other enterprises

Representatives of owners of State capital invested in other enterprises are defined as follows:

1. The branch-managing ministries, pending the transfer to the State Capital Investment and Business Corporation, for State capital in one-member limited liability companies transformed from independent State companies set up under decisions of the branch-managing ministries.

2. The Finance Ministry, pending the transfer to the State Capital Investment and Business Corporation, for:

a) State capital in other enterprises set up with capital contributed by the central budget;

b) State capital in State corporations and independent State companies, which have been set up under decisions of ministries or branches and are fully equitized;

c) State capital in joint-venture enterprises set up on the basis of independent State companies which were established under decisions of ministries or branches, have fully contributed capital to the joint-ventures and no longer have the legal person status as State companies.

3. The provincial-level People’s Committees, pending the transfer to the State Capital Investment and Business Corporation, for:

a) State capital in State-run one-member limited liability companies transformed from independent State companies set up under decisions of provincial-level People’s Committees;

b) State capital in other enterprises, invested or contributed by local budgets;

c) State capital in joint-stock companies set up on the basis of State companies which were established under decisions of provincial-level People’s Committees and are fully equitized;

d) State capital in joint-venture companies set up on the basis of State companies which were established under decisions of provincial-level People’s Committees, have fully contributed capital to the joint-ventures and no longer have the legal person status as State companies.

4. State corporations, independent State companies, for:

a) State capital in State-run one-member limited liability companies transformed from member enterprises of corporations or newly set up with investment by State corporations or companies;

b) State capital in joint-stock companies set up on the basis of full equitization of member enterprises of corporations or partial equitization of independent State companies;

c) State capital in joint-ventures formed on the basis that member enterprises of corporations have fully contributed capital to the joint-ventures and no longer have the legal person status as member enterprises of corporations or that corporations or independent State companies have contributed capital to the joint-ventures;

d) Capital invested in other enterprises by State corporations or independent State companies.

5. The State Capital Investment and Business Corporation, for:

a) State capital in one-member limited liability companies, joint-stock companies, multi-member limited liability companies, joint-venture companies, transferred by ministries, branches or localities;

b) State capital in one-member limited liability companies set up under decisions of corporations;

c) State capital in enterprises where exists contributed capital of corporations.

6. The ministries, branches and provincial-level People’s Committees shall have to transfer the task of managing State capital in other enterprises to the State Capital Investment and Business Corporation according to the Prime Minister’s decisions and schedule.

Article 45.- Rights and obligations of representatives of owners of State capital invested in other enterprises

1. For organizations being owners of State-run one-member limited liability companies, they shall exercise the rights and perform the obligations of owners under the provisions of the Enterprise Law.

2. For organizations being representatives of owners of State capital invested in other enterprises, they shall have the following rights:

a) The rights of shareholders, capital-contributing members, joint-venture parties as prescribed by law and charters of such other enterprises;

b) To appoint representatives to exercise the rights of shareholders, capital-contributing members, joint-venture parties at the general assemblies of shareholders, capital-contributing members or joint-venture parties;

c) To appoint, dismiss, commend and discipline representatives of State capital portions at other enterprises (hereinafter called the representatives for short), to decide on salaries, allowances, bonuses and preferential treatments for the representatives, except for cases where the representatives have been salaried by other enterprises;

d) To request the representatives to make regular or irregular reports on business results and/or financial situation of other enterprises;

e) To assign tasks and direct the representatives to protect the legitimate rights and interests of the State and the companies in other enterprises. To request the representatives to report on the performance of tasks, powers and responsibilities of the representatives, particularly in directing the enterprises where exist the State’s dominant shares or contributed capital to realize the State’s objectives, strategies;

f) To examine and supervise activities of the representatives, detect their shortcomings and weaknesses in order to prevent and redress them in time;

g) To decide or propose competent persons to decide on investment by increase or withdrawal of State capital invested in other enterprises in accordance with law and charters of the other enterprises;

h) To bear responsibility for the efficiency of the use, preservation and development of capital invested by the State;

i) To supervise the recovery of State capital lent to laborers for share purchase upon equitization of State enterprises, the recovery of shares provided for laborers to enjoy dividends when such laborers die without heirs or when the laborers voluntarily return the shares (for enterprises equitized before July 14, 1998) sold on credit to poor laborers in the State enterprises equitized after July 14, 1998;

j) To supervise the recovery of capital invested in other enterprises, the collection of dividends from other enterprises;

k) To perform other rights and obligations as prescribed by law.

Article 46.- Rights and obligations of representatives of State capital portions at other enterprises

1. To stand as candidates for the managerial and executive apparatuses of other enterprises according to the charters of such enterprises.

2. When authorized, to exercise the rights of shareholders, capital-contributing members, joint-venture parties at general assemblies of shareholders, capital-contributing members or joint-venture parties, to exercise such rights cautiously strictly according to the directions of owners’ representatives, particularly in cases of being dominant shareholders or capital contributors.

3. To monitor and supervise the situation of business and financial activities, results of business activities of other enterprises according to law provisions and charters of enterprises. To report periodically or at requests of owners’ representatives on situation and results of business activities, financial matters of other enterprises, on the performance of tasks assigned by owners’ representatives.

4. To monitor, urge and recover State capital in other enterprises, including capital lent to laborers for share purchase, shares sold on credit to laborers, shares divided to laborers for enjoying dividends, transfer of State shares, collection of dividends and other amounts divided from capital contributed to other enterprises.

5. The representatives joining in the boards managing or administering other enterprises must study and put forth orientations and measures for their activities at other enterprises for submission to the owners’ representatives for approval. For important issues put up for discussion in the Management Boards, the Directorates or general assemblies of shareholders, capital-contributing members or joint-venture parties such as orientations, strategies and plans for business, mobilization of additional shares, contributed capital, division of dividends..., the representatives must ask for opinions of the representatives of capital owners before the meeting and voting. In cases where many representatives join the Management Board, the Directorate of another enterprise, they must together discuss and reach agreement when stating their opinions and voting.

6. The representatives in enterprises where exist the dominant shares or contributed capital of the State shall have to direct such enterprises to the right objectives and orientations of the State. When detecting that the enterprises have diverted from the State’s objectives and orientations, they must immediately report such to the capital owners’ representatives and propose remedies. After getting the approval from the capital owners’ representatives, they must organize the immediate implementation so as to quickly direct the enterprises to follow the pre-set objectives and orientations.

7. To perform other rights and obligations according to law provisions, enterprises’ charters and regulations of assigned capital owners’ representatives.

8. To be answerable to the capital owners’ representatives for the assigned tasks. In cases of causing damage to capital owners’ representatives due to their irresponsibility, abuse of tasks and powers, they must bear responsibility therefor and pay material compensations according to law provisions.

Article 47.- Salaries, bonuses and interests of the representatives

1. The representatives who join in the boards for management and administration of other enterprises shall enjoy salaries, allowances, bonuses and other interests prescribed in the charters of such enterprises and paid by such enterprises.

2. The representatives at other enterprises who do not enjoy salaries, allowances, bonuses and other interests from such enterprises shall be paid the salaries, allowances, bonuses and other interests by the capital owners’ representatives.

The representatives must not simultaneously enjoy salaries, allowances, bonuses and other regimes from both units.

Article 48.- Criteria of the representatives

The representatives must satisfy the following criteria:

1. Being Vietnamese citizens permanently residing in Vietnam. In case of being appointed by the Management Boards or directors of the companies (for companies without Management Boards), the representatives must be staff members of such companies.

2. Possessing good ethical qualities and good health for performance of tasks.

3. Having law knowledge and good sense of law observance.

4. Having professional qualifications in corporate finance or business domains of other enterprises with investment capital of the State, having capabilities for business and organization of enterprise management. Persons directly managing the State capital portions at joint ventures with foreign parties must be proficient in foreign language(s) in order to directly work with foreigners in the joint ventures without interpreters.

5. Being neither parents, spouses, children or siblings of owners’ representatives, Management Board members, enterprise directors having contributed capital to enterprises which are assigned to such persons for management; having no relations in capital contribution for establishment of enterprises, loan provision, in signing trading contracts with State-invested enterprises which are assigned to such persons for direct management, except for case of having shares at equitized State enterprises.

The representatives standing as candidates for the Management Boards, the directors of other enterprises must meet all criteria and conditions corresponding to those of members of the Management Boards, directors of State companies as prescribed by law.

Article 49.- Collection of divided profits

For profits divided from other enterprises, the representatives shall have the responsibility to request other enterprises:

1. To transfer them into the Enterprise Reorganization Funds, for cases where the branch-managing ministries, the Finance Ministry or provincial-level People’s Committees are representatives of capital owners as provided for in Clauses 1, 2, 3 of Article 44 of this Regulation.

2. To transfer them to the companies which have capital contributed to other enterprises, for cases prescribed in Clauses 4 and 5 of Article 44 of this Regulation.

Article 50.- Right to decide on increase or reduction of State capital in other enterprises

The use of divided profits to increase or reduce the State capital portions in other enterprises is prescribed as follows:

1. For cases where branch-managing ministries, the Finance Ministry or provincial-level People’s Committees are representatives of owners of State capital in other enterprises as provided for in Clauses 1, 2 and 3, Article 44 of this Regulation, the ministers or presidents of the provincial-level People’s Committees shall consider and decide.

2. For cases where State corporations or independent State companies are representatives of owners of State capital in other enterprises as provided for in Clauses 4 and 5, Article 44 of this Regulation, the corporations shall consider and decide on the principles that the persons deciding on plans for investment of capital in other enterprises shall also be the persons deciding on the use of divided profits to supplement the investment capital; or decide to reduce the State companies’ capital invested in other enterprises.

3. The mode of increasing or reducing State capital in other enterprises shall comply with law provisions and charters of the enterprises.

Article 51.- Handling State capital recovered from other enterprises

The State capital recovered upon decisions to reduce State capital in other enterprises, upon dissolution or bankruptcy of other enterprises; the recovered money amounts which were lent to laborers for share purchase upon equitization of State enterprises, value of shares divided to laborers for enjoying dividends, shares sold on credit to poor laborers in enterprises (for State enterprises equitized after July 14, 1998) shall be handled as follows:

1. Being transferred into the Enterprise Reorganization Funds, for cases prescribed in Clauses 1, 2 and 3 of Article 44 of this Regulation.

2. Being transferred to the State companies which have contributed capital, for cases prescribed in Clauses 4 and 5 of Article 44 of this Regulation.

Article 52.- The Finance Ministry shall have to guide the implementation of this Regulation. The State corporations and State companies shall base on this Regulation and guiding documents to elaborate, amend and supplement their own financial regulations for submission to the competent authorities for approval.

On behalf of the Government

Prime Minister
PHAN VAN KHAI

APPENDIX

LIST OF THE GOVERNMENT’S DOCUMENTS WHICH CEASE TO BE EFFECTIVE

(Promulgated together with the Government’s Decree No. 199/2004/ND-CP of December 3, 2004)

1. Decree No. 56/CP of October 2, 1996 on State enterprises engaged in public-utility activities.

2. Decree No. 59/CP of October 3, 1996 of the Government, promulgating the Financial Management and Business Accounting Regulation applicable to State enterprises.

3. The Government’s Decree No. 27/1999/ND-CP of April 20, 1999 amending and supplementing the Financial Management and Business Accounting Regulation applicable to State enterprises (issued together with the Government’s Decree No. 59/CP of October 3, 1996).

4. The Government’s Decree No. 73/2000/ND-CP of December 6, 2000 promulgating the Regulation on management of State capital in other enterprises.

5. Other documents promulgated by the Government, which are related to the financial management of State companies and the management of State capital invested in other enterprises.